Can Paying “Too Much” or “Too Little” Tax Contribute to Forced CEO Turnover?

2017 ◽  
Vol 93 (1) ◽  
pp. 103-130 ◽  
Author(s):  
James A. Chyz ◽  
Fabio B. Gaertner
Keyword(s):  
Empirical Evidence ◽  
Tax Avoidance ◽  
Ceo Turnover ◽  
Corporate Tax ◽  
Tax Rate ◽  
Forced Turnover ◽  
Reputational Costs ◽  
Jel Classifications ◽  
Reputational Concerns

ABSTRACT Our study examines the effect of corporate tax outcomes on forced CEO turnover. While prior research argues that firms often do not engage in tax avoidance due to reputational concerns, the empirical evidence suggesting the existence of reputational costs is scarce. In a broad sample of firms, we find evidence of a relation between the payment of low taxes and forced turnover. We also find that forced CEO turnover is more likely when the firm pays a high tax rate relative to its peers. Our results are consistent with the existence of previously unexplored individual reputational costs for not engaging in tax avoidance. JEL Classifications: M40; H25.

Is Tax Avoidance Related to Firm Risk?

2016 ◽  
Vol 92 (1) ◽  
pp. 115-136 ◽  
Author(s):  
David A. Guenther ◽  
Steven R. Matsunaga ◽  
Brian M. Williams
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Firm Risk ◽  
Corporate Tax ◽  
Stock Volatility ◽  
Tax Rate ◽  
Avoidance Strategies ◽  
Jel Classifications

ABSTRACT We test whether tax avoidance strategies are associated with greater firm risk. We find that low tax rates tend to be more persistent than high tax rates and that measures of tax avoidance commonly used in the literature are generally not associated with either future tax rate volatility or future overall firm risk. Our evidence suggests that, on average, corporate tax avoidance is accomplished using strategies that are persistent and do not increase firm risk. We also find that the volatility of cash tax rates is associated with future stock volatility, suggesting that tax rate volatility and overall firm risk are related. JEL Classifications: M41.

Transfer Pricing and Location of Intangibles - Spillover and Tax Avoidance through Profit Shifting

2020 ◽  
Author(s):  
Rebecca Reineke ◽  
Katrin Weiskirchner-Merten
Keyword(s):  
Empirical Evidence ◽  
Transfer Pricing ◽  
Home Bias ◽  
Tax Avoidance ◽  
Optimal Location ◽  
The Other ◽  
Profit Shifting ◽  
Tax Rate ◽  
Length Range ◽  
A Company

This study examines how spillovers affect a multinational company's choice of an intangible's location and the corresponding transfer price for using this intangible. Our model uses a company with a domestic division in a high-tax country and a foreign division in a low-tax country, where each division's activities generate spillovers on the other division's income. In contrast to previous studies, our analysis incorporates an intangible's optimal location when the company trades off tax minimization and efficient activities. By locating the intangible abroad, the company reduces its tax liability, whereas locating the intangible domestically yields more efficient domestic division activities. For a high spillover of the domestic division, the company locates the intangible domestically. Our model supports empirical evidence regarding intangibles' location that is interpreted as "home bias". Additionally, we show how variations in regulatory parameters-arm's length range and tax rate differential-affect the divisions' activities and the intangible's location.

scholarly journals Effects of IFRS adoption on tax avoidance

2017 ◽  
Vol 28 (75) ◽  
pp. 407-424 ◽  
Author(s):  
Renata Nogueira Braga
Keyword(s):  
Financial Reporting ◽  
Tax Avoidance ◽  
Publicly Traded ◽  
Corporate Tax ◽  
Firm Level ◽  
Tax Rate ◽  
Publicly Traded Companies ◽  
Accruals Management ◽  
Financial Reporting Standards ◽  
Ifrs Adoption

ABSTRACT This study investigates the association between mandatory International Financial Reporting Standards (IFRS) adoption and corporate tax avoidance. In this study, tax avoidance is defined as a reduction in the effective corporate income tax rate through tax planning activities, whether these are legal, questionable, or even illegal. Three measures of tax avoidance are used and factors at the country and firm level (that have already been associated with tax avoidance in prior research) are controlled. Using samples that range from 9,389 to 15,423 publicly-traded companies from 35 countries, covering 1999 to 2014, it is found that IFRS adoption is associated with higher levels of corporate tax avoidance, even when the level of book-tax conformity required in the countries and the volume of accruals are controlled, both of which are considered potential determinants of this relationship. Furthermore, the results suggest that after IFRS adoption, firms in higher book-tax conformity environments engage more in tax avoidance than firms in lower book-tax conformity environments. It is also identified that engagement in tax avoidance after IFRS adoption derives not only from accruals management, but also from practices that do not involve accruals. The main conclusion is that companies engage more in tax avoidance after mandatory IFRS adoption.

scholarly journals Does Corporate Social Responsibility Influence Corporate Tax Avoidance of Chinese Listed Companies?

2018 ◽  
Vol 10 (12) ◽  
pp. 4549 ◽  
Author(s):  
M.A. Gulzar ◽  
Jacob Cherian ◽  
Muhammad Sial ◽  
Alina Badulescu ◽  
Phung Thu ◽  
...  
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Tax Avoidance ◽  
Listed Companies ◽  
Primary Objective ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Tax Rate ◽  
Chinese Listed Companies ◽  
Corporate Social

The primary objective of this paper is to empirically examine whether corporate social responsibility (CSR) influences corporate tax avoidance (CTA) of Chinese listed companies. The study is based on a sample of 3481 firm-year observations from 2009 to 2015 using CSR ratings from the Rankins (RKS) corporate social responsibility ratings agency in China, and all financial data extracted from the China Stock Market and Accounting Research (CSMAR). The authors foundthat CSR is negatively related to the current and cash effective tax rate (proxies of corporate tax avoidance), suggesting that responsible firms are more involved in tax avoidance as compared to less responsible firms. Their findings are robust against different control variables. Additionally, to the best of the authors’ knowledge, the paper is one of the first to document an empirical association between CSR and corporate tax avoidance of Chinese listed companies.

scholarly journals Corporate Tax Avoidance and Debt Costs

2019 ◽  
Vol 42 (2) ◽  
pp. 117-143 ◽  
Author(s):  
Terry Shevlin ◽  
Oktay Urcan ◽  
Florin P. Vasvari
Keyword(s):  
Private Information ◽  
Information Quality ◽  
Tax Avoidance ◽  
Bank Loan ◽  
Bond Yields ◽  
Corporate Tax ◽  
Cross Sectional ◽  
Negative Effect ◽  
Loan Spreads ◽  
Jel Classifications

ABSTRACT We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. We find that approximately one half of the total effect of tax avoidance on bond yields is explained through the negative effect of tax avoidance on future pre-tax cash flow levels and volatility and, to a lesser extent, lower information quality. The effects of these mediating variables are much less pronounced for bank loan spreads. The results of additional cross-sectional analyses indicate that, relative to bond investors, banks are able to reduce information asymmetry problems more effectively, given their access to firms' private information and greater ability to monitor borrowers. JEL Classifications: G31; G32; M10; O16.

Study of Effective Corporate Tax Rate and Its Influential Factors: Empirical Evidence from Emerging European Markets

2018 ◽  
Vol 54 (3) ◽  
pp. 571-590 ◽  
Author(s):  
Georgeta Vintilă ◽  
Ştefan Cristian Gherghina ◽  
Radu Alin Păunescu
Keyword(s):  
Empirical Evidence ◽  
Influential Factors ◽  
Corporate Tax ◽  
Tax Rate ◽  
European Markets

Earnings Management, Corporate Governance and Tax Avoidance: The Case in Indonesia

2017 ◽  
Vol 2 (4) ◽  
pp. 28-35
Author(s):  
Lulus Kurniasih ◽  
Sulardi Sulardi ◽  
Sri Suranta
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Quality ◽  
Stock Exchange ◽  
Tax Avoidance ◽  
Governance Mechanisms ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Tax Rate ◽  
Corporate Governance Mechanisms

Objective - This study aims to determine the effect of earning management and corporate governance mechanisms on corporate tax avoidance. Methodology/Technique - Corporate governance mechanisms use institutional ownership, the size of the board of commissioners, the percentage of independent commissioners, auditing committees, and audit quality as proxies. Meanwhile, earnings management uses the modified Jones model. The sample of this study include non-financial companies that are listed on the Indonesian Stock Exchange (IDX) between 2014 and 2016. Findings - Corporate tax avoidance can be detected by using the effective tax rate (ETR), which is the ratio of income to tax expenses. This sample was chosen using a purposive sampling method, resulting in 871 firms. The results suggest that earnings management has a significant impact on ETR. Novelty - This study identifies that only independent commissioners and audit quality have a significant influence on ETR. Type of Paper - Empirical Keywords: Tax Avoidance; Earnings Management; Corporate Governance; Effective Tax Rate; Audit Quality. JEL Classification: G3, G39, G39.

The Use of Compensation for Tax Avoidance by Owners of Small Corporations

2005 ◽  
Vol 27 (1) ◽  
pp. 73-90
Author(s):  
Gregory G. Geisler ◽  
Sally Wallace
Keyword(s):  
Empirical Evidence ◽  
Tax Avoidance ◽  
Professional Services ◽  
Corporate Tax ◽  
Taxable Income ◽  
Marginal Change ◽  
Tax Returns ◽  
Using Data

This study provides empirical evidence on the extent to which taxes influence owners' compensation in small (fewer than 500 employees) Subchapter Selecting corporations (S corporations), taxable corporations that provide professional services (PSC corporations), and other taxable corporations (C corporations). Paying additional compensation to owner-employees likely increases the total after-tax income for PSC corporations with positive taxable income. Paying additional compensation to owner-employees is, however, less likely to increase the total after-tax income for C corporations and does not increase the total after-tax income for S corporations. Using data from the corporate tax returns of 503 small corporations, this study examines the marginal change in owners' compensation as taxable income changes. The study finds that, per dollar of taxable income, PSC corporations increase compensation to owneremployees significantly more than C corporations.

Sign in / Sign up

Export Citation Format

Share Document